Q&A: Krome Studio's Robert Walsh on Melbourne House Acquisition

Brisbane, Australia based independent developer Krome Studios has announced its acquisition of former Atari development studio Melbourne House for an undisclosed sum. The intended sale of the long-running studio was declared by Atari back in February.

Krome have revealed that the studio will be renamed Krome Studios Melbourne, and will see the company’s overall in-house staff numbers rise to almost 300 people, making them by far the largest video game company in Australia, as well as one of the largest independent studios worldwide.

The acquisition marks the second major expansion for Krome in the past year, following the formation of Krome Studios Adelaide from former Ratbag Games personnel after the company was closed down in December 2005, only months after being bought out by Midway.

Krome itself recently finished development on The Legend of Spyro: A New Beginning for Sierra Entertainment, and it working on Hellboy for Konami, due out in 2007. The studio is also working on several unannounced current and next generation games and focusing on extending their catalog of original IPs. Melbourne House itself has strong roots in Australia, dating back to 1980 when it was formed under the name Beam Software, and is known for early classics such as text adventure The Hobbit.

Gamasutra spoke to Krome Studios CEO and co-founder Robert Walsh about the Australian industry, the take-over of Melbourne House, and what it means for the company in the future.

When did Krome start, and what was the basic aim behind the company at the time?

We started in late 1999, so we’re a relatively young company. The general philosophy when we started was just to make fun games, and we started off by making surfing titles and water-sport titles, but we brought a lot of fun elements into that.

Really, it was just about having fun making games originally. It was a small group of maybe 5 or 6 people.

How focused were you on the business side of things at the time? Did you consider possibilities for growth?

I have a business degree in my background, and at the time we started I was working by day and doing games by night, but I knew the value of understanding that you need the money to come in and pay bills, and that passion will only get you so far.

That was kind of the thing that I brought into the mix with all the guys we started with – just to have a sense of the finances and how to keep a business running, and not just a games studio, but any business. Out of all the all the publishers I’ve talked to, their general comment is that most studios are all run by super creative people, and sometimes they don’t focus on the business stuff.

What do you see as the Australian industry’s position in a worldwide sense at the moment?

If you look at what’s happened over the last few years, THQ’s established a studio over here now, and the head of worldwide studios for THQ is based out of Brisbane. So that’s a pretty big statement when you look at the fact that a top four publisher has one of their top executives is based out of Australia.

I think the being so close to the Asia Pacific rim puts us even more on the radar for a lot of overseas publishers right now, because we’re in the same time zone as those territories, and if you look a few years down the track, outsourcing is going to become a bigger part of our industry as a whole, and a lot of that is being looked at in that territory.

I think if you look at some of the stuff we’ve done, we’re a pretty steady country. I mean, we’re certainly not a third world country. We’ve been around a long time – some of the original games studios here were making games 15 or 20 years ago. Although we’re a small country, there’s a long history of being in the industry. So, where it fits moving forward is hard to say. You could ask the same question of the UK studios that all went out of business about a year and a half ago.

We’re still an attractive place to do business from the US side, and we’re seen as being a pretty creative group of people.

Did the demise of Ratbag Games last year affect the way that you’re doing business?

Not at all actually – it worked out really well for me! I picked up a studio and I didn’t have to pay for it. [Laughs]

For our studio, anyway, we do a lot of homework about who we do business with. Ratbag wasn’t the first example of studios being hamstrung by one publisher. Blue Tongue having to sell to THQ is another example of being locked into the one studio or publisher. Although we didn’t learn from it, it reinforced that for us – it’s all good when things are going really, really well, but the industry is really fickle, and the public is really fickle about product. If you’re working with one company on a product that seems really good on paper today, but when the next Halo comes out and you’ve got a Halo competitor product, and you get beaten to market, then it puts you in a very difficult position. It just further reinforces the fact that you have to diversify.

Did it strengthen your resolve to stay independent?

It certainly reinforced the idea that if I get bought out, to do longer homework! [Laughs]

But we’ve got no plans to be absorbed by a publisher, and being independent is good. We get to choose the products we want to work on, and who we want to work for, and one of the problems with being tied to a singular entity is that sometimes you get forced into taking products that might not be the best fit for the studio. But the publisher sees that studio as just a case of ‘well, we’ve got all those people just sitting around, let’s make that first person shooting team go onto a driving game’. They just see it as headcount.

Do you see the expansion of Krome as a way to further diversify what you’re doing?

It’s funny because both Melbourne House and Ratbag were known as driving studios – they’ve both got good driving tech. But I can tell you now that the Ratbag guys are working on something nowhere near being related to a driving game. I think we look at it in the sense that both studios are really mature, with people who’ve worked together for more than five years, and the hardest thing to do today is to add people to a team and make them feel part of the team and get that team up and running really fast.

In both instances, we’ve been able to put a lot of people on the ground, running fast – people who have worked together for a long time. Some of the Melbourne House guys have worked together for 15 years. That’s not something you can hire off the street, from an employee perspective.

It won’t necessarily diversify the type of products that we make, but it reinforces and broadens the portfolio of what we make. We’re primarily a 3D action company – that’s what we do, and we do it well. If you look at that core game mechanic, that accounts for something like 60% of the market. It just means we can take more work on in the genres we’re good at.

What kind of position was Melbourne House in, prior to you stepping in, and what motivated the move?

Well, they were owned by Atari, so can you determine what kind of position they were in from that. [Laughs]

I’d been talking to them for quite some time. I had original discussions with them back in March at the Game Developers Conference. Part of it was business, and the other part was emotional. I knew Adam Lanceman, who founded Melbourne House, and passed away a few years ago, and at the end of the day, some of the stories that I was hearing about what might happen to the studio just didn’t sit very well.

It was kind of a personal thing about that studio and being the cornerstone of the Australian industry, and not keeping it as a studio just didn’t seem right. I wanted to keep those guys working, and I think some of the things that were happening basically meant they were going to be dismantled.

The other thing is, we’re trying to hire people, and it’s hard to find 40 really super qualified people in one hit! Everybody’s looking for next-gen people right now, and we’re working on multiple next-gen titles, and there’s a lot of experience in those studios, and it basically bolts right in. So, there’s a lot of personal reasons, but from a business perspective, it makes great sense.

Had Melbourne House been working on anything? They hadn’t released anything since Transformers, had they?

All I can say is they’re working on an internal Atari product right now, and that’s coming to a close.

What plans do you have for the studio?

In the short term, they have a really good technology group, so we’re just going to fold them in. We’re doing four projects at the moment, and we’re looking at a couple more, and they’re going to form part of the teams that we’re already working on. There’s a couple of small projects that we’d like to develop down there.

The end goal is to get them to work on one of two projects, wholly inside the studio. We’re basically going to be one big family that’s working on all the projects together, and then in the longer term we’ll get them working on projects that they can control from inside their own studio.

Is that a big concern for you, to have the studios outside of Brisbane working autonomously like that?

Not really – outsourcing’s been the buzz word for the last year and a half, but when we started Krome six years ago, within the first year we were already outsourcing to guys in New Zealand. We did work with the guys from Sidhe.

We have a history of being able to work with people that aren’t necessarily in the studio. At the moment we’ve got pieces of projects in Europe and China, and Taiwan – all over the place. We’re already doing other work in Melbourne at the moment, and we’re working with other people in Adelaide besides our own studio. It’s just an extension of what we’re already doing.

The other thing is that the Adelaide thing worked out so well that it made me feel more comfortable to take the Melbourne one on. If it worked once, it should work again. They all seem pretty happy. [Laughs]

Do you have many concerns about the takeover?

Yeah, our business is super risky, there’s no doubt about it. Look at Argonaut – that’s a classic example. Jez San was a pioneer in our industry, but due to market conditions things tend to turn really, really fast. The biggest concern is just being able to find work for the guys to work on.

There’s no production concern – like I said, that’s a team that’s worked together for a long time. A lot of them have shipped games going back eons, so there’s no worry about the productivity, it’s just whether our industry can continue to sell product in the marketplace, and keep us all fed.

So, obviously the integration of Melbourne House into Krome isn’t a concern?

No, it’ll take time, because they’re going from the culture of being an internal studio to the culture of being an independent developer. I don’t think that studio’s had a lot of attention over the past couple of years from a corporate perspective, so there’ll be some kinks here and there.

But I’ve been down there extensively over the past couple of weeks, and I’ve met everybody, and I’ve spoken to everybody, and we’ve got a glowing report card from most people. For them it’s great – they see it as a fresh start to work on stuff that they’re pretty excited about.

When do they start working as part of Krome?

I was down there today, and they have tools, engine, tech – a whole bunch of stuff. So they’re getting up to speed with all our Krome stuff. It couldn’t start until there was an effective date, and that was yesterday or today.

There’s still one small part to go, which will get sorted out today, and the phone should be answered “Krome” by Monday.

How is it all being funded? Is it internal through Krome?

Yeah, it’s all independent, and my credit card will take a hit. There’s no outside money or anything like that – it’s still just Steve [Stamatiadis, Krome co-founder and creative director] and myself. We’ve just basically borrowed the money for it. We’re staying private.

Is that the goal for the distant future as well?

Yeah, definitely. It’s worked for us for a long time, and we’ve done a pretty good job of it. If you look at it, by the time we add Melbourne House, we’ll have almost 290 people, and that’s all over the country. That’s pretty huge.

Being the second acquisition in a year is pretty cool too – most people have been selling, or going out of business. [Laughs]

We’re doing it in small chunks – the first one was 20, the one will be 30 or 40, and the next one might be 100.

What plans for growth do you have for the future?

Well, it’s going to take a while to absorb this one. I think we’ll continue to work with multiple partners, since that’s worked really well for us in the past. If I look at our total manpower right now, in addition to this acquisition, we’re working with 25 guys in Melbourne in another studio, 10 guys in Adelaide, 20 people in China and about 15 in Europe, so I think in the short term we’ll look at leveraging those relationships before we look at adding more into the fold.

We just want to use that as the short term plan, and build upon that before base before we do anything else. It takes a lot of systems to run that many people effectively.

Is the focus from here on in next-gen?

Definitely. We’ve got one announced next-gen title, and one other unannounced title at the moment. We’re looking to do more next-gen titles, which will start in the next six weeks, and we’re looking at two current gen games as well. I think soon we’ll just be a next-gen studio, which just makes sense.

Do you see the Australian industry continuing to grow?

Oh yeah, if you look at all the bloody message boards, no one can find staff, so I can’t see how it won’t grow. Most of the stuff we’ve been doing is pretty good, and everyone is hiring, so the biggest challenge right now is just finding the right people to be able to grow.

The Team Bondi guys are looking for a gazillion people, and guys in Melbourne are, and we’re all looking for the same staff, which is pretty funny. I think the Australian industry is probably growing faster than any other territory – I don’t have the numbers factually, but if you just look at Australia as a country, our percentage increase over the last few years is outrageous. Two or three years ago, we only had a hundred guys. Everybody here has got to be doing at least 20 or 30 percent growth in the last three years.

It’s pretty good, actually. We have people coming down to give us work! If you look at our population, considering we’ve only got 20 million people, I think we’ve done pretty well.